Another perspective on small business in the era of Big Government
August 25, 2010 – 11:50 pm by JohnI liked this blag post by Philip Greenspun about how his small business suffers, both in absolute terms and relative to the competition, in the face of more government, more regulations, and more lobbyists. One reason I liked it might be because it fits in with our original goal in founding this blag: writing about real-world, everyday experiences that show how more government hurts people and how we’d be better off without it.
Federal and state governments offer a lot of subsidies and incentives for businesses, or so we’re told, but we never have more than one admin person working the front desk at any given time. We don’t have qualified staff ready to go looking for government programs to tap into. We know how to serve private customers, but not how to get money from the government. This puts us at a disadvantage compared to big companies that can afford to spread the cost of a full-time “getting money from the government” employee.
A government that consumes a larger percentage of the GDP is a government that makes lobbying more fruitful. In a lobbying war, however, the small will inevitably lose out to bigger enterprises.
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You might think that we’d be doing well because the government has decided to put more money into education. The new funds, however, generally can only be used at degree-granting institutions. Once enrolled in a “bachelor’s of aviation” program, the spigots open up for the student’s tuition, housing, and food. This is great for established large colleges and universities because, even though they may charge 50% higher prices than our school, it works out to be cheaper for the student. Our prices are lower and our instructors are more experienced, which gives us a competitive advantage when dealing with privately-funded students. In a world where most of the new students are government-funded, however, we are inevitably out-competed by the big schools.
One commenter pointed out that you don’t have to be a big business with legions of administrators and lobbyists to get the government grant money; you can hire private businesses or independent contractors who know how to get the government money for you, and in this way, it’s one private business helping another private business get government money that was going to be spent anyway. That’s not a terrible argument for the practical debate about who suffers and benefits under corporate-State socialism, but as it does so often, Ludwig von Mises’s calculation argument comes into the forefront: how do we know the free market would have allocated the government grant money to the places it ends up? How do we know that was best? What did we miss out on because it was allocated thusly? When and how would those allocations of resources have been deemed inefficient and been modified or replaced altogether with some opportunity that someone anticipated or took a chance on, and then gained a competitive advantage and transformed the market in some important way? It is impossible to know or even guess.
Even if, as I doubt, small governments are or could become as capable of getting tax dollars as large businesses, and even if the endless government regulations that big businesses lobby for and small businesses have no resources to oppose or support could help some small businesses as much as some large businesses, there is absolutely no way to determine whether the ultimate allocation of tax money (and labor, capital, land) was the way it would have been without State interference. Because the State can’t calculate but markets can, it is clear that the free market’s allocation of that grant money would be more efficient for the whole society and in the long run than the government’s.
